{
consultants
educators
researchers
Swimming Upstream: How Design is Moving
Up the Value Chain in the Services Era
Norwegian Design Council • October 15, 2008

p 2
Introducing the “Moaster” – launches toast 5 meters into the air.
“We don’t need any new
products. That’s the
challenge facing today’s
designer.”
− Freddie Yauner,
designer of the
Moaster

what is the role of
design
not
in an era that does
need new products?

p 4
Quiz: Do you respond differently to these kids shampoos?

p 5
Perhaps some comparative data will help you decide.
Cleans best
Rinses cleanest
Best fragrance
Cost-efficient bottle
Lowest cost/ounce
Best shelf placement
Highest ad budget
? ?
Market share

p 6
“My kids want the whole aquarium” … (it is not about shampoo).

p 7
There are different ways to use design.
“Doing the
strategic
design right things”
operational “Doing
design things right”
“Design as
decorative
design billboard”
non- “Bare
design minimum”

p 8
As goods became less important, underlying business disciplines changed, too.
1980s 1990s 2000s
s*
service
US and EU
* focus of 5
economic
output years of
goods
Peer Insight
research
e
nc
perie
er ex n
m
custo novatio
in
transformative
business
disciplines ty
quali
* Note: 1987 was the tipping
point in the US

p 9
Quite a few admired firms contributed to our research.

p 10
The Peer Insight list.
OUT IN
Goods Era Services Era
Selling products Delivering experiences
Competitors Customers
Quality Personalization
Factory IT
Roads & Trucks Internet
Systems thinking Design thinking
1000-person market research 10-person ethnographic studies
Management (certainty) Entrepreneurship (confidence + uncertainty)
Big, loud brands Authentic brands
Business model exploitation Business model exploration
Incremental improvement Game-changing innovation
Lab-based innovation Open innovation
Outsourcing Employee engagement
Hierarchical structures Collaborative structures
Supply chains Demand chains
Web 1.0 (free digital newspaper) Web 2.0 (digital collaboration space)

p 11
Wow, what a GREAT
The Peer Insight list. time to be a designer!
OUT IN
Goods Era Services Era
Selling products Delivering experiences
Competitors Customers
Quality Personalization
Factory IT
Roads & Trucks Internet
Systems thinking Design thinking
1000-person market research 10-person ethnographic studies
Management (certainty) Entrepreneurship (confidence + uncertainty)
Big, loud brands Authentic brands
Business model exploitation Business model exploration
Incremental improvement Game-changing innovation
Lab-based innovation Open innovation
Outsourcing Employee engagement
Hierarchical structures Collaborative structures
Supply chains Demand chains
Web 1.0 (free digital newspaper) Web 2.0 (digital collaboration space)

p 12
In the Services Era, firms typically adopt innovation along this path.
Innovation 3.0
(cultures)
“Why”
Cultural
5 transformation
Operating model
4
“How it (programs)
Innovation 2.0
scales” 3 Senior leadership
Customer-centricity
2
(projects)
“How”
Innovation 1.0
1 Innovation as a new
discipline
no man’s land (experiments)
“If”
M&A +
Six Sigma
Source: Peer Insight analysis of 150+ recent service innovation projects

p 13
2 Innovation requires deep customer-centricity (outside-in).
40
We found that the use 36
of a single frame –
Customer Experience 35
Design – was a key
differentiator between
30 28
success and
26 26
mediocrity.
25
Evidence of robust customer
projects
experience design in use for
20
116 recent service innovation
projects contributed by 45
Global 500 corporations
15
42 most successful projects
10
74 less successful projects
5
little or no some solid most
Source: Peer Insight research evidence evidence evidence evident

p 14
2 Customer-centricity showed up in many forms.
Secrets of cX design
• Start with unmet user needs, not new ideas
• Research methods are based on deep customer
empathy (e.g., ethnography)
• Focus is on the customer journey – not merely
your own touch points
• Emphasis on identifying and winning the moments
of truth
• Rapid, low-fidelity service prototyping
• Co-creation – including the customer in the
earliest stages
• Open innovation – bringing together a unique
value network, leveraging external IP
• Creating evidence of the brand attributes within
the touch points
• Use of storytelling to convey the experience intent
• Overcoming metrics that run counter to creating
compelling experiences
• Creating a broad view of experiences – going
beyond marketing and into operations and IT
Source: Peer Insight research

p 15
Reaching “Innovation 2.0” is a big challenge … it needs DESIGN, not designers.
Innovation 3.0
(cultures)
“Why”
DESIGN
Operating model
4
“How it (programs)
Innovation 2.0
scales” 3 Senior leadership
Customer-centricity
2
(projects)
“How”
Innovation 1.0
1 Innovation as a new
discipline
no man’s land (experiments)
“If”
designers
M&A +
Six Sigma
Source: Peer Insight analysis of 150+ recent service innovation projects

p 16
2 How design interacted with business at HP during the 1990s.
what business people do
Select customers

Frame Opportunities

Business Challenges

Portfolio of Offerings Portfolio of Offerings


Offerings Offerings

Features/Functions

Aesthetics
what designers do

p 17
3 Advice from Hewlett-Packard on moving design upstream.
HP 2003: 2008:
Two paths to use design for strategic impact
business people
Frame Opportunities

Strategic Influence
Business Challenges
Scope of Influence
by leading or participating in

development of business
strategies and plans via
Portfolio of Offerings “Design Thinking”

Steve Sato of
Offerings Sato+Partners

Features/Functions
Strategic Impact to have broader impact

within existing strategies or plans, via “Design Thinking”
Aesthetics
designers
Development &
Discovery/ Innovation &
Evaluation
Investigation Prioritization Validation
Strategy/Plan/Offering Development Lifecycle

p 18
3 Advice from Hewlett-Packard on moving design upstream.
HP 2003: 2008:
Two paths to use design for strategic impact
business people
DESIGN
Frame Opportunities

Strategic Influence
Business Challenges
Scope of Influence
by leading or participating in

development of business
strategies and plans via
Portfolio of Offerings “Design Thinking”

Steve Sato of
Offerings Sato+Partners
designers

Features/Functions
Strategic Impact to have broader impact

within existing strategies or plans, via “Design Thinking”
Aesthetics
designers
Development &
Discovery/ Innovation &
Evaluation
Investigation Prioritization Validation
Strategy/Plan/Offering Development Lifecycle

p 19
3 Senior leaders must learn to work with (and think like) designers.
LEFT BRAIN RIGHT BRAIN
known known unknown
knowns unknowns unknowns
execution problem-solving exploration
Prove it in Try it and see
advance if it works
(reliability) (validity)
Inspired by Roger Martin, Rotman School of Business, University of Toronto

p 20
3 Senior leaders must learn to work with (and think like) designers.
LEFT BRAIN RIGHT BRAIN
known known unknown
knowns unknowns unknowns
execution problem-solving exploration
Finance Design
Engineering Innovation
Marketing Social sciences
Operations Entrepreneurship
Law
Prove it in Try it and see
advance if it works
(reliability) (validity)
Inspired by Roger Martin, Rotman School of Business, University of Toronto

p 21
Eight tips to accelerate the transformation in your organization.
• Love non-designers
• Wrap yourself in the cX flag
• Share ownership, share credit
• Align with the growth leaders
• Mediate our conversations (visually)
• Learn to speak business model
• Evolve from artists to architects
• Make a commitment to measurement

p 22
Eight tips to accelerate the transformation in your organization (continued).
Speak their language … or
at least meet them half way.
• Love non-designers
Not everyone agrees on the
importance of design, but
• Wrap yourself in the cX flag
everyone agrees on the
importance of customers.
• Share ownership, share credit
All the value is being • Align with the growth leaders
created at the intersections
• Mediate our conversations (visually)
between the traditional
disciplines.
• Learn to speak business model
Growth leaders prefer to
• Evolve from artists to architects
learn through action in the
marketplace, not through
• Make a commitment to measurement
analysis of passive data.

p 23
Eight tips to accelerate the transformation in your organization (continued).
We all learn in different
ways, but visual learning
(and story-based) learning
• Love non-designers
is the most universally
effective mode.
• Wrap yourself in the cX flag
The business model
• Share ownership, share credit
connects the technical
domain and the social • Align with the growth leaders
domain.
• Mediate our conversations (visually)
The designer as artist
• Learn to speak business model
creates value from within a
mystery; The designer as
• Evolve from artists to architects
architect generates value
by creating an environment
• Make a commitment to measurement
others can see and inhabit.
No discipline can break
through without measurement.

p 24
The Services Era is different.
It is a GREAT time to be a designer.
We know customer-centricity works.
We are learning how to connect design
and business … i.e., innovation.
Designers can accelerate that process.

questions?

now, go try it at home

Peer Insight
Tim Ogilvie
tim@peerinsight.com
(703) 314-3123